Sunny Gupta: I left IBM and joined a local Seattle-based venture company called Performant as a business guy. I stayed there for 18 months and sold that business to Mercury Interactive. Once I went to Mercury, I transitioned into a product role. That was incredible because a lot of my learnings around being close to the customer started applying there. I stayed there for 18 months. At that time I really felt like that I didn’t know much in the first startup I’d done in 1996. When I was in Mercury, I felt I had learned a lot and was ready to be a CEO and an entrepreneur again. I started my own business in the data center automation space called iConclude in 2005 and raised capital. We got 25 customers including Goldman Sachs. Mark Andreessen and Ben Horowitz came knocking on our door and said, “This is pretty disruptive technology.” They bought our business in less than two years of the company life for over $70 million. It felt like there was unfinished business because I felt it could have been a really big company. It was in the data orchestration space. We had nailed the product market fit right but didn’t have the sales scale experience. It was a life-changing event for me personally. I decided to sell the business.
I went then and ran products for Opsware and then sold that business to HP six months later. I had no desire to go to HP. I was talking to many customers. The office of the CIO at Goldman Sachs asked me what I was going to do next. I was thinking of going into the venture business but I really had an unfulfilled desire to build a company of substantial scale. I was 37 at that time. I asked the customer what they were struggling with and they started describing the concept of what Apptio is today. I came home and validated the concept. Then in the fall of 2007, we started what is Apptio now. Long story, but I just wanted to bring you up to speed on the Apptio front.
Sramana Mitra: Tell me more about the concept of Apptio that you were going to start with.
Sunny Gupta: When I was sitting at the office of these CIOs at Goldman Sachs, they said something pretty interesting to me. They said, “Look, IT is becoming more strategic.” They also saw the cloud coming. This is now in 2007 where the cloud isn’t at the same level where it is today. They said, “The role of the CIO is changing. We’ve been too focused on running the technology itself. We’ve also been putting business systems in place for all other functions in the enterprise. We put the sales CRM for VP of Sales. They put finance systems for the CFO. We are starting to put marketing systems for the CMO.”
Interestingly enough, the IT leader has no equivalent business management and analytic system to run the business of technology. IT is at a scale of complexity that a lot of customers are managing $10 billion in technology expenses. Smaller customers are managing $10 million or $100 million. The CIO basically said, “We don’t run our personal finances in spreadsheets. We use personal financial management software. Interestingly enough, we have these really large strategic IT shops and the growth of technology is mind-blowing that there’s no business management system or analytic system for the office of the CIO while the CIO has been putting a business system in place for everybody else. It’s the cobbler’s children having no shoes.
That was really the genesis of Apptio. I asked them, “What do you mean by a business management system? What problems are you trying to solve which you are not able to solve today?” They said, “We are becoming a service provider to the business. We are delivering services, computer, storage, and applications. We are delivering end-user computing, mobility, desktops, and telecoms. We need to be able to understand the fully-loaded cost structure to deliver these services. What part of that cost structure is fixed versus variable direct indirect? How does a CIO deliver a bill of IT to the business?” The business goes and buys something from Amazon, they get a bill from Amazon. But the IT is not able to deliver a similar type of bill for what they’re consuming. The IT shops are not able to benchmark themselves relative to other people in the industry. They’re not able to make business decisions like what workload to move to the cloud and other business decisions impacting technology. That’s really the problem statement which was described to me in that meeting with Goldman Sachs.
Sramana Mitra: This was in 2007?
Sunny Gupta: In 2007, yes. By the way, the economy hasn’t gone south yet. The Wall Street crisis didn’t really hit until 2008. We were validating a business in 2007 where there were early phases where people were starting to feel the pressure of the economy a little bit.